Author Topic: Fighting An Appraisal  (Read 710 times)

Jon Bon

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Fighting An Appraisal
« on: April 10, 2021, 01:29:27 PM »
So we have all been talking that 1% properties no longer exist, and I am completely in that boat. They do not exist in my city other than maybe a class C property, or something very rural. Neither of which I am interested in at all. Enter a 10 bedroom 6 bathroom duplex. I have a 4.375% mortgage that I am doing a cash out refinance on. I paid ~365k owe ~250k on the house. I have held it for 5 years or so and it generates about $4,200 in cash every month.

Now similar investment properties are going in the .8% - .6% range. So I was going to refinance down to 3%, and pull out money to keep the payment close to the same win win right? I have a ton of equity Right? Appraisal comes back ready?

You sure?

Ok here it is: $421,000

Lolz, I'm pretty sure I could sell this house to most of you sight unseen for 421k renting for 4200 a month! I am relatively sure I could have an offer for 500k before sundown, and 550k if I actually tried to sell it via the MLS. 421k is basically 3% gain, just the rate of inflation. That ignores the epic RE gains over the past 5 years.

I did push back against the appraisal and oh boy, things got even better. First this person shorted me 2 bedrooms. Its only 8 according to her. However when I mentioned this they said, no that would only value it at 430k. So apparently according to this appraiser adding 2 bedrooms which is another $900 a month in gross rents increases the value of the house by $9,000! Furthermore, there was an official comp That was a 6/2 double, rented at $3,000 that sold for 485k. So a property getting significant less rent is somehow worth 60k more?

I sent a pretty irritated email back. I'm fine getting a new lender over this, I mean its pretty bush league to have no idea what you are doing like that.  Feel free to share some advice and or just laugh at me and my silly appraiser.


norajean

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Re: Fighting An Appraisal
« Reply #1 on: April 10, 2021, 02:02:54 PM »
The appraisal fight is fought before the appraiser writes their final report. You must meet them at the property, provide them detailed drawings and photos, saving them time, and chat them up all about the property and your expectations for the result. I have found this usually works better than expected and some appraisers will even confirm the result verbally on the spot. At this stage not sure much you can do but start over or get your own appraiser.

uniwelder

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Re: Fighting An Appraisal
« Reply #2 on: April 10, 2021, 06:04:07 PM »
I don't have much advice, but thought I'd share my appraisal story.  We did a HELOC on our house 2 years ago and the appraisal came very low--- valued at tax assessment, about 90k, which was from before we did major renovations.  I argued that the other houses used as comps weren't really comparable--- my 1,500 sq ft insulated garage was calculated as nearly equivalent to 2 space carports (5k adjustment given), we had done a complete gut renovation while the other houses were falling apart, etc.  Plus the other houses sold for 20-40% more than tax assessed value.  The bank adjusted the appraisal up 20% when I argued this.  The loan officer was apologetic, said he didn't have control over the choice of appraiser, and admitted he'd buy my house for 140k no problem.

We just put that house up for sale and signed a contract for 180k two days ago.  Values in my area have gone up in two years, but not tremendously.  Tax assessments were just recalculated this year and they are about 20% higher on average than they were 5 years ago.  We had our house appraised before selling FSBO to determine a price, and the appraiser had come up with 175k, which is what we advertised it for.

So, somehow our house doubled in value in a two year period, in an area that probably went up less than 20% during that time.  I think appraisals for bank loans are done very conservatively to the bank's favor.

PMJL34

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Re: Fighting An Appraisal
« Reply #3 on: April 10, 2021, 08:24:03 PM »
Sorry to hear this OP.

I completely agree with Norajean that you need to be there and point stuff out and hold them accountable.

If it makes you feel any better, I had an appraisal done last month and the dude was in and out of the home within 2 minutes after snapping a few phones pics. He then sent me the appraisal a few days later that was literally the zillow value on the dot (zillow values in my area are wayyyy off). Regardless of the appraised value, my refi was going through so I didn't care, but still just sucks that it's completely subjective. His comps were from different cities, different zip codes, you name it. It was a joke. I looked him up and he's not even from my area. My guess is that the online refi company I went through just wanted the cheapest possible person and he was it.

Best of luck on fighting the appraiser, but my guess is that you will need either a new appraisal or a new lender.

Dicey

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Re: Fighting An Appraisal
« Reply #4 on: April 12, 2021, 09:26:17 AM »
Whoa boy, do I have stories.  Short answer: do their work for them. Have a list of nearby recent comps, provide a list of upgrades, try to get a local appraiser.

Here's an example on a rental property: I couldn't be there, so I spoke to the appraiser on the phone in advance. Since I was an original owner in the development, I was able to point out added features (extended garage, extended casita, oversized lot, gourmet kitchen package, etc.). I also gave her tips on how to identify those upgrades on any property in the 5,000 home development and what these upgrades cost when the homes were built. The result? The appraiser used choice comps and the number came in insanely high. I was just doing a re-fi, and didn't plan to sell, so as long as it hit the LTV I needed, I was happy. At the time, there were several distressed property sales as comps, so it was time very well spent.

Our primary home was a short sale, partly because it was overbuilt for the area. (We didn't care, because it fit our family's needs + walk to work for DH.) It came on the market in 2012 for $800k. The lender only wanted to see the highest and best offer; we had to bid $928k to be that. We didn't care about the appraisal because we knew the house and we were paying cash. The short sale lender cared quite a bit as the owner/builder was underwater. Their appraisal indicated that the house was worth $35k more than our offer and they tried to strongarm us for it. Our Realtor fought like a tiger for us. She couldn't get them to replace the distant appraiser, but she picked apart his comps and provided them with a list of better ones. Eventually, the lender backed down and accepted our offer as written. Luckily, this was before the market exploded. Nine years later, the value exceeds our wildest expectation.

Based on these and other experiences, my advice is to fight. I'd probably start by verifying that the appraiser is experienced with multifamily and/or commercial property. If this means choosing another lender, there's your answer.
Best of luck to you!

Oh, I just remembered that Zillow has a fun tool for comps. Look up your property, "Claim" it as the owner, and they will show you the comps they used. You can challenge those comps, and Zillow will show you more. Do this until you find closer matches and save them. I did this several years ago. To this day, Zillow's Zestimate closely reflects the current market. Redfin is consistently over $300k lower.

One more thought. My parent's 5BR, 3 bath, 2 story house showed up as 1328 sf on MLS. I called the Tax Assassin's (<--- auto carrot) office, and they blamed the builder's original inputs and said they'd look into it. I used the Zillow feature described above to correct the number. Just yesterday, I was surfing the old neighborhood. I noticed Zillow reported "Other interior features - Total interior livable area: 2,149 sqft" for my parent's house and two others of the same floor plan, which is correct. However, all the rest of this plan in the development still have the wrong numbers. Relevance: check to see what stats the Tax Assessor's office is using. Ha! I just remembered (again) the same thing happened on the rental I mentioned above  because of the optional extended casita. Same process fixed it.

Jon Bon

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Re: Fighting An Appraisal
« Reply #5 on: April 12, 2021, 10:48:05 AM »
Thanks all, unfortunately so far this appraiser seams "Immune to math" which is troubling!

I agree the most likely outcome is I find a different lender. I mean so far I am out zero dollars and if I pass on the loan they eat the cost of the appraisal. So they can order a new one, or loose the loan.

I for sure done lots of math, sent comps etc. There is the wall between the loan officer and the appraiser, so I have no idea how much is getting through to the other side.

Really its just a funny story, almost as bad as the underwriters!




rothwem

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Re: Fighting An Appraisal
« Reply #6 on: April 13, 2021, 08:10:38 AM »
Thanks all, unfortunately so far this appraiser seams "Immune to math" which is troubling!

I agree the most likely outcome is I find a different lender. I mean so far I am out zero dollars and if I pass on the loan they eat the cost of the appraisal. So they can order a new one, or loose the loan.

I for sure done lots of math, sent comps etc. There is the wall between the loan officer and the appraiser, so I have no idea how much is getting through to the other side.

Really its just a funny story, almost as bad as the underwriters!

That's really unusual.  Every time I've gotten a loan I've had to pay for the appraisal in advance. 

joe189man

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Re: Fighting An Appraisal
« Reply #7 on: April 13, 2021, 08:41:44 AM »
we did a cash out refi on our primary home around christmas, the appraisal came back so low i laughed and wanted to cry. i pressed the appraiser and all he said was show me the comps. i argued about how the comparisons between my home and comps was ridiculous and not consistent, and he did nothing. i almost walked away from the deal but just did it because in the end it didnt matter too much. in my case, my home appraised for about 11% less than i thought it should compared to recent sales and market conditions.

i think, and this is a guess, that for a cash out refi, an appraiser uses a different criteria to value a home compared to a purchase price. in a refi, they want to protect the lender from you going bust and not paying the mortgage, so they keep the value of the home a little lower. In a purchase lender wants the appraisal to be about what the negotiated contract price is, so the appraiser makes it happen. they also dont look at current market condtions and only sold comps even if they are older sales. again just a guess.

Any appraisers want to chime in and verify or shoot down this hypothesis?

Dicey

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Re: Fighting An Appraisal
« Reply #8 on: April 13, 2021, 08:51:59 AM »
we did a cash out refi on our primary home around christmas, the appraisal came back so low i laughed and wanted to cry. i pressed the appraiser and all he said was show me the comps. i argued about how the comparisons between my home and comps was ridiculous and not consistent, and he did nothing. i almost walked away from the deal but just did it because in the end it didnt matter too much. in my case, my home appraised for about 11% less than i thought it should compared to recent sales and market conditions.

i think, and this is a guess, that for a cash out refi, an appraiser uses a different criteria to value a home compared to a purchase price. in a refi, they want to protect the lender from you going bust and not paying the mortgage, so they keep the value of the home a little lower. In a purchase lender wants the appraisal to be about what the negotiated contract price is, so the appraiser makes it happen. they also dont look at current market condtions and only sold comps even if they are older sales. again just a guess.

Any appraisers want to chime in and verify or shoot down this hypothesis?
Did you show him better comps?

DadJokes

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Re: Fighting An Appraisal
« Reply #9 on: April 13, 2021, 08:54:31 AM »
Appraisers are the worst.

We had a house come in (back in 2018) at $20k below what we were expecting. We checked the report and found a lot of mistakes. We pointed out several of them, and they said that they weren't going to change the appraisal. We could have fought it harder, but it would have delayed selling our old house and the purchase of the new house. So we just passed it on to the buyer. We told the buyer that we wouldn't take less than X, regardless of what the appraisal was, and that he/she would just have to come up with the difference, since the lender wouldn't give more than the appraisal.

uniwelder

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Re: Fighting An Appraisal
« Reply #10 on: April 13, 2021, 09:14:48 AM »
we did a cash out refi on our primary home around christmas, the appraisal came back so low i laughed and wanted to cry. i pressed the appraiser and all he said was show me the comps. i argued about how the comparisons between my home and comps was ridiculous and not consistent, and he did nothing. i almost walked away from the deal but just did it because in the end it didnt matter too much. in my case, my home appraised for about 11% less than i thought it should compared to recent sales and market conditions.

I realize my comment isn't very helpful, but an 11% difference in opinion doesn't sound too bad.  I guess it depends on whether you're talking about a 150k home vs 800k.  I assume there must be a lot of other similar homes to compare against, to even know that bit of difference is calculable. 

joe189man

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Re: Fighting An Appraisal
« Reply #11 on: April 13, 2021, 04:48:57 PM »
we did a cash out refi on our primary home around christmas, the appraisal came back so low i laughed and wanted to cry. i pressed the appraiser and all he said was show me the comps. i argued about how the comparisons between my home and comps was ridiculous and not consistent, and he did nothing. i almost walked away from the deal but just did it because in the end it didnt matter too much. in my case, my home appraised for about 11% less than i thought it should compared to recent sales and market conditions.

I realize my comment isn't very helpful, but an 11% difference in opinion doesn't sound too bad.  I guess it depends on whether you're talking about a 150k home vs 800k.  I assume there must be a lot of other similar homes to compare against, to even know that bit of difference is calculable.

maybe my math was wrong, it was large enough where i questioned even doing the cash out because the difference took away most of the Cash were expecting from the refi. i reviewed the comps for way too long, man i still get pissed thinking about it

LaineyAZ

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Re: Fighting An Appraisal
« Reply #12 on: April 14, 2021, 08:27:05 AM »
Appraisers are the worst.

We had a house come in (back in 2018) at $20k below what we were expecting. We checked the report and found a lot of mistakes. We pointed out several of them, and they said that they weren't going to change the appraisal. We could have fought it harder, but it would have delayed selling our old house and the purchase of the new house. So we just passed it on to the buyer. We told the buyer that we wouldn't take less than X, regardless of what the appraisal was, and that he/she would just have to come up with the difference, since the lender wouldn't give more than the appraisal.

I had almost the exact same thing happen.  My home appraisal came in at about the expected number, but it contained several basic mistakes.  All of those were things I'd noted with the appraiser prior to them completing the report, e.g., my Heat pump was brand new, but they reported it as being "average condition."

When I asked for those items to be corrected they refused saying it wouldn't affect the final number.  Huh? 
Isn't this report a document on the computer that you can edit with just a few clicks?  I felt like "not gonna change it" was just laziness on their part, but I guess they know that when you're at the end process of getting the financing that you're not likely going to upend that.  Still peeved, though, that I paid $300 for an inaccurate report.